What is Fundamental Analysis?
Fundamental analysis is about using the intrinsic value of a security and evaluating it to your advantage.
When you analyze fundamentally, you make use of the various economic and financial factors that could affect your decisions in life - like the decision to invest in a particular stock.
There is a need to constantly update yourself with the current events and news so as to determine whether or not a particular change can affect the value of a security. Furthermore, news and events affect companies. As a result, it affects its health and performance.
Under fundamental analysis, revenue, expenses, and liabilities are often reviewed. Financial statements – income statement, statement of financial position, cash flow – can provide insight into the future performance of a company. All of these are part of the quantitative aspect of the fundamental analysis.
When talking about the qualitative aspect of fundamental analysis, one must focus on the board members’ and executives’ decisions within the company. Brand recognition, patents, and proprietary technology can present various information necessary to arrive at a financial decision.